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Ireland: Sharp Increases in Personal Taxes Introduced

(Apr. 10, 2009) On April 7, 2009, Ireland's Minister of Finance introduced a Supplemental Budget in the Dáil Éireann, or lower chamber of Parliament, that leaves Ireland's low corporate tax rates of ten percent on manufacturing and 12.5 percent on most business income untouched, but sharply increases personal taxes and levies. (Department of Finance, The Budget, Apr. 7, 2009, available at
.) Income levies to be introduced apply to incomes in excess of the threshold level of approximately €15,000 (about US$19,850) and will be two percent on incomes of individuals up to about €75,000, four percent on incomes of individuals up to about €174,000, and six per cent on the incomes of individuals above that level. These increases are in addition to the income taxes that are already being imposed in Ireland. The Supplemental Budget will also raise the health levies to between four and five percent to pay for increases in health care costs, limit the already capped mortgage interest deduction to seven years, and raise the capital gains rate for eligible capital gains from 22 to 25 percent. (Id.)

On April 8, 2009, the Taoiseach (Prime Minister), Brian Cowen, delivered a speech in the Dáil Éireann in support of the budget. (Brian Cowen, Taoiseach, Dep't of the Taoiseach, Speech at the Dáil Éireann (Apr. 8, 2009), available at The Taoiseach began by calling it “one of the most critical Budgets in the lifetime of the State,” intended to put the “country on a five-year plan to economic renewal.” (Id.) The leader of the government noted that about 30 percent of income earners, or about 670,000 persons, would be exempt from the income levy, as would those persons who hold medical cards issued to persons unable to afford health care. He also noted that over a million persons would be exempt from the health levy and that the top one percent of wage earners would contribute nearly a quarter of the total yield from the income levy.

The Taoiseach claimed that despite the readjustments, Ireland will continue to have “one of the most favorable tax regimes in the OECD [Organisation for Economic Co-operation and Development].” Yet, Ireland's tax rate for single persons without dependents is 20 percent on the first €36,400 (about US$48,170) and 41 percent on balances above that amount. (Irish Taxation 2009 and 2008, Finfacts Ireland website, (last visited Apr. 8, 2009).)

Opposition parties have argued that the government should do more to reduce spending, but the Taoiseach has argued that additional unemployment-related expenditures caused by the economic crisis and the need to continue investing in infrastructure for the future make additional cuts virtually impossible. As it is, the budget does call for cutting €4.8 billion (about US6.4 billion) from the previous budget with further savings of €2.2 billion in 2010 and €2.5 billion in 2011. (Brian Cowen, supra.)

Corporations were not only spared in the supplemental budget, but also were offered tax relief for the acquisition of intangible assets including intellectual property. This incentive was created to stimulate the development of a “Smart Economy.” (Id.)